Equity funds or stock funds are those types of mutual funds that focus mainly towards investment on stocks. Because of their focus towards investing on stocks, they are also called as growth funds.

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The equity funds are good for ordinary individuals looking to grow their assets.

As they are managed by an efficient and professional management, it also gives the investor a safeguard as well.

They are a preferable option for people with limited knowledge about market functions.

Individuals with small resources can invest on larger stocks as the fund pools together funds from different individuals.

Equity funds can be classified in to several categories based on various aspects.

One main division of the funds is based on the catering of investment on stocks, i.e. active and passive.

In active funds, the investment is focused on a particular firm’s stock that is selected by the professional management after careful study of the market.

On the other hand, when the fund manager guides the investment in to a broader portfolio, then it is called as a passive fund.

Similarly, they are classified further into large cap, mid cap and small cap based on the market capitalisation.

If an equity fund is invested into various and diverse segments in the market, it is called as diversified equity fund.

On the other hand, if the investment is limited to a particular sector alone, then it's called as a sectoral fund.